Understanding interchange is not relating to the lyrics of a gloomy Joy Division song.
Interchange is not some obscure anthem that 8Os goth kids glommed on to while bleeding mascara before moving on to New Order and synth pop later in the decade while studying to become corporate lawyers at university.
Understanding interchange WILL allow you to understand credit card processing fees.
Understanding Interchange & Other Fees
When a business accepts credit cards, the owners must pay merchant fees, also known as processing fees, to cover the cost of the transaction.
There are three primary moving parts in a credit card transaction.
If you look at a credit card, there are two logos. One is the bank that issued the card, and the other is the card brand like Visa, Mastercard, American Express and Discover.
The bank that issued the card gets paid interchange fees, one of the two true costs a business must cough up. The true cost fluctuates based on risk that is assessed by several factors including the size of the transaction, industry and quality of information transmitted. The card brand needs to get paid too. These interchange and card brand fees are fixed costs.
The third moving part is your merchant processor.
Interchange Markup
The key to understanding interchange is determining how much your credit card processor marks up these fees.
Larger payment processors with brand recognition claim that they have the best rates. To qualify for these rates, you often must sign a three-year agreement that might not benefit your business in the long term.
Ethical Pay Pro wants to earn your business every day by offering a fair markup. We do not lock you into a contract and feature a transparent merchant account with no hidden fees and no penalty to terminate the agreement.
Interchange Fees Will Not Tear Us Apart
After reading this, you may feel interchange and all credit card fees are inevitable. There is an option to pass these fees on to your customer. Check out this post on cash discounting where you can learn more about this topic.
Whether you are electrician who thinks Joy Division might have something to do with video games or a former goth and current Proctor & Gamble counsel, you can learn more about ways to avoid interchange fees and improve the way you get paid by tapping here for a free consultation.